Tax incentives in India
August 2014
For discussion purpose only
Contents
1
Overview of tax incentives
2
Location-based tax incentives
3
Special zones incentives
4
Activity-based incentives
5
Industry-specific incentives
6
Our value proposition
7
Annexure
8
Glossary
Overview of tax
incentives
Overview of tax incentives
►
►
In order to attract new investments, develop infrastructure and promote export/ industries, India offers
various incentives such as tax holidays, investment allowances, tax credits, rebates and so on
Prior to expansion/ new investments, companies should evaluate and avail of available incentives to
obtain tax synergies. Some of the incentives could be available to existing as well as new businesses
Tax
incentives
Location based
►
►
Tax holiday in specified locations, viz., the
Northeastern regions of India
State-level incentives
Export linked
►
►
►
►
►
Benefit for R&D expenditure
Employment of new workmen
SEZ developer
Business of collecting and processing biodegradable waste
Project Import Scheme for initial set-up or
substantial expansion of specified projects
Activity based
►
►
Export from SEZ units
Various indirect tax benefits/refunds, etc
Industry specific
►
►
►
►
►
►
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Infrastructure and power facilities
Oil and gas
Cold chain and warehousing
Hospitals
Fertilizer production
Affordable housing project schemes
Hospitality and tourism, etc
Location-based
incentives
Specific incentives — state level
Greenfield manufacturing projects, substantial expansion and diversification
Land related
►
Stamp duty waiver/concessions
►
Other concessions on registration charges, property
taxes, conversion charges, etc
►
Single-window clearance
Infrastructure
►
Electricity duty exemption
►
Rebates in tariffs for electricity/water/gas
►
Subsidies on clean manufacturing technology, pollution
control, etc
Capital investment and employment
►
VAT/CST-linked subsidies/soft loan/exemption
►
Exemption or refund of entry taxes
►
Subsidies linked to social security contributions (PF/ESI)
►
Other subsidies (technology, transport, etc)
►
Special incentive package for mega projects
Benefits depend on the size
of eligible investment,
location, employment
generation, nature of
products, etc
States such as
Maharashtra, Rajasthan,
Tamil Nadu and West
Bengal provide various
incentives
Customized incentives for
mega projects or
investment in backward
areas based on negotiations
with relevant state
governments
Incentives vary across states depending on their respective industrial policies
Undertaking/Manufacturing facility in Northeast India
Location
►
Tax benefits are available for setting up undertaking/manufacturing facilities (“units”) in the
Northeastern states of India
►
No area restrictions are applicable in these states, i.e., the unit can be set up anywhere in the
notified regions
►
The notified states are Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim and Tripura
Eligibility
►
Manufactures or producers of any article or thing or carrying out any eligible business (such as
hotels in the two-star category or above, bio-technology, manufacturing of information technology
hardware)
►
The following products are not eligible for deduction in respect of direct tax incentives:
►
►
►
Tobacco and manufactured tobacco products
Plastic carry bags
►
►
Pan masala
Goods produced by petroleum oil or gas refineries
Manufacturing activity must be initiated before 1 April 2017
The key incentives are:
►
Deduction of 100% of profits of the qualifying unit for 10 consecutive years
►
Deduction restricted to profits of the unit on a stand-alone basis
►
Refund on excise duty payable on specified value addition for 10 consecutive years
Special zones
incentives
Must be engaged in the export of goods and services from 1 April
2005 onward
►
Must not be formed by splitting up or reconstructing an existing
business
►
Not to be formed by transferring a previously owned plant and
machinery to the SEZ unit
Book profits subject to MAT; nevertheless, MAT credit available for
10 years
►
SEZ units eligible for a 15-year tax holiday (in a phased manner –
refer below table)
Deduction
formula
for SEZ
=
Conditions
►
Tax
holiday
SEZ unit
SEZ developers
►
Should be involved in the development, operation and
maintenance of SEZs, including their infrastructure facilities
Book profits subject to MAT; nevertheless, MAT credit is available for
10 years
►
Developers eligible for a 10-year tax holiday out of 15 years from
the year in which the particular SEZ is notified
Profits of SEZ unit x [export turnover of unit/total turnover of unit]
Quantum of deduction for the SEZ unit
Period of deduction
100% of export profits
First 5 years
50% of export profits
Next 5 years
50% of export profits, provided that the profits are
transferred to a Special Economic Zone Reinvestment
Reserve Account for the purpose of acquiring plant or
machinery within 3 years
Next 5 years
SEZ benefits (for the unit/developer) once expired cannot be renewed
More incentives for SEZ units
Customs duty
►
Customs duty exemption on goods imported for authorized
operations
►
Customs duty not payable on goods exported by a unit to any
place outside India (though customs duty is payable on a sale to
the DTA)
►
No specific approval/license required for imports
Excise duty
►
Excise duty exemption on all goods brought from the DTA into an
SEZ Unit to carry out authorized operations
►
Goods manufactured by an SEZ unit not liable to excise duty (but
clearances are subject to customs duty)
Value-added tax
►
VAT exemption on the purchase of goods within the state in most
of the states
►
Exemption from CST on the inter-state purchase of goods used for
authorized operations
Service tax
►
Upfront exemption from service tax for services received by the
SEZ for authorized operations
►
Other services not exclusively used for authorized operations
eligible for service tax refund, subject to conditions
►
Output services provided by SEZ zero rated if services
qualify as “export of service”
States grant
additional benefits
such as stamp
duty exemption,
VAT exemption/
refund and
electricity duty
exemption
Incentives for
exporters
Scheme
EOU
EPCG
AA/DFIA
SFIS
Benefits
Exemption/Refund of various indirect taxes such as customs duty, excise duty and CST on the
procurement of capital goods and inputs (as the case be) for permitted operations
Allows duty-free procurement of capital goods by exporters, subject to the fulfilment of export
obligation and other specified conditions
Permit the import of inputs without customs duty, subject to the fulfilment of value-added norms
and export obligation
Available to specified service providers having service exports of INR1 million or more – for
import/procurement of spares, office equipment, furniture and consumables
Post export benefit allowed by way of duty credit scrip equivalent to 10% of the net foreign
exchange earned in the current financial year
Duty drawback
Post export benefit to allows rebate of taxes and duty paid on inputs and input services used in
the manufacture of exported goods at prescribed rates
FPS/FMS
Post export benefit allowed by way of duty credit scrip equivalent to a specified percentage of
the FOB value of exports of specified products to any country/all products to notified countries
Activity-based
incentives
Weighted deduction for R&D
Benefit: in-house R&D facility
eligible for deduction @ 200%
under the Act
Permissible expenditure : capital
expenditure incurred (except on
land and building) up to 31 March
2017 on in-house scientific R&D
facility approved by the DSIR
Eligibility
200% deduction on in-house R&D
Companies engaged in the
manufacturing or production of any
article or thing (other than as mentioned
in Schedule 11 – Refer Annexure 1)
or in bio technology business
Recent
experience
►
►
Key compliances
Separate accounts to be maintained and
audited for each approved facility
Progress report of R&D activities to be
submitted every year within the prescribed
time
Applications are reviewed in depth by the DSIR before granting approval
Incentives for R&D
Customs duty concession
Customs duty exemption
►
Goods imported for R&D purpose
►
Export turnover of INR 200 million in the
preceding FY
An R&D wing registered with the DSIR
Goods not to be sold or transferred for seven
years from the date of installation
►
Research
institution
►
►
Towards import of-
Incentive/Benefit
Agro-chemical
R&D unit
Scheme
Company having an
in-house R&D unit
Parameters*
►
Concessional rate of customs duty
►
Specified instruments, equipment, consumables
►
Importer to be a non-commercial research
institute
Importer to be registered with the Government of
India in the DSIR
Goods not to be sold or transferred for five years
from the date of import
►
►
►
Customs duty exemption
►
Specified instruments, equipment, components, etc
►
The project must be:
a) undertaken by any company having an in-house R&D unit recognized by the DSIR under the Ministry of Science and Technology;
b) funded by the Government of India or related agencies (share of funding not to be less than 20%)
Goods not to be sold or transferred for five years from the date of import
►
►
Apart from the customs duty exemption for units registered with DSIR, a provision has been made for entities not registered with DSIR for
payment of customs duty at the time of import by public funded and other research institutions, and then claim refund of customs duty paid,
subject to submission of a certificate of registration from DSIR and other specified conditions
*The above parameters are only preliminary and generic
Employment of
new workmen
Deduction equivalent to 30% of additional wages/salary (over
and above expenditure on wages/salary) available for three
years in respect of new workmen employed
Benefits
available to
►
Factory [as defined
under the Factories Act,
1948] of an Indian
company
►
Manufacturers of goods
in a factory
►
Factories not formed by
hiving off, transfer of
another existing entity
or as a result of
amalgamation with
another company
Workmen
include/exclude
►
Workers engaged in
any manual, skilled or
technical work
►
Does not include
casual workmen, those
employed through
contract labor or
employed for < 300
days during a tax year;
neither for employees
in a managerial/
administrative capacity
or in supervisory
capacity drawing
salary exceeding INR
0.01 million per month
Number of
workmen
►
Deduction only for
undertakings employing
more than 100 workmen
during the year
►
Deduction only for wages
paid to new workmen
> 100 employees
►
Additional condition –
deduction only if total
number of new
employees is at least
10% more than the
existing workforce (and
minimum of 100
employees)
Reporting and
compliance
►
Return to be
accompanied by
particulars certified
by the tax auditor in
the prescribed form
Claims on additional salary/wages could be considered for entry-level employees
Investment allowance (Large Investments)
►
Deduction for the acquisition and installation of new
assets by a company engaged in the manufacture or
production of any article or thing after 31 March 2013 but
before 1 April 2015 (specified period)
►
►
►
Actual cost of new assets acquired/installed during the
specified period to exceed INR 1,000 million
Neutral to the description of the article
Foreign currency fluctuation gains/losses to be factored
►
Allowance independent of depreciation claim and
computation of WDV
►
New asset: plant and machinery excluding ships, aircraft,
computers or computer software, vehicles, etc
►
►
►
►
►
Assets depreciable @ 100% do not qualify for relief
Tax holiday units eligible for investment-linked incentive
would not qualify for allowance
There is no specific reference to “intangible” assets
Non eligible assets do not enter the calculation of the 1000
million mark
Deduction @ 15% shall be as follows:
Period of
investment
Quantum of
deduction
(A) 1 April 2013
to 31 March
2014
15% of the actual cost
of the new asset
acquired and installed
during the tax year
2013-14, if
investment > INR 1,000
million
(B) 1 April 2014
to 31 March
2015
15% of the actual cost
of the new asset
acquired and installed
during the period
1 April 2013 to 31
March 2015, as
reduced by deduction
under (A) above, if
aggregate investment >
INR 1,000 million
Investment allowance (Mid-Size Investments)
►
Deduction for the acquisition and installation of new
assets by a company engaged in the manufacture or
production of any article or thing on or after 1 April 2014
but before 1 April 2018 (specified period)
►
►
►
Actual cost of new assets acquired/installed during the
specified period to exceed INR 250 million
Neutral to the description of the article
Foreign currency fluctuation gains/losses to be factored
►
Allowance independent of depreciation claim and
computation of WDV
►
New asset: plant and machinery excluding ships, aircraft,
computers or computer software, vehicles, etc
►
►
►
►
►
Assets depreciable @ 100% do not qualify for relief
Tax holiday units eligible for investment-linked incentive
would not qualify for allowance
There is no specific reference to “intangible” assets
Non eligible assets do not enter the calculation of the 250
million mark
Deduction @ 15% shall be as follows:
Period of
investment
Quantum of
deduction
1 April 2014 to
31 March 2017
15% of the actual cost
of the new asset
acquired and installed
in each tax year, if in
each tax year
investment > INR 250
million
Incentives for agricultural extension and skill
development
New incentives introduced w.e.f 1 April 2013
Parameters
Agriculture Extension
Skill development
Qualifying expenditure
Any expenditure on an “agriculture
extension project”, as notified by CBDT
Any expenditure (except for cost of land and building)
on “skill development project:, as notified by CBDT
Quantum of weighted
deduction
150% of expenditure
150% of expenditure
Terminal date for expiry of
incentives
None
None
Prescribed authority for
approval and guidelines
CBDT
CBDT
Guidelines prescribed
Yes (subject to notification in the Official
Gazette)
Yes (discussed in the ensuing slide)
Expenditure
on skill
development
Deduction available: 150% of expenditure on skill
development
Expenses on skill
development
“Eligible company” and
“training institute”
Guidelines prescribed
by the CBDT
► Expenses to include:
► Eligible company means a
company:
► Skill development to be
undertaken by an eligible
company in separate facilities in
a training institute
► All expenses incurred
wholly and
exclusively for skill
development (except
cost of land and
buildings)
► Expenses
reimbursed to the a
company whether
directly or indirectly
not eligible for
deduction
►
►
Manufacturing or production of
any article or thing (other than
alcoholic spirits and tobacco
products); or
Providing specified services
such as construction, health
care, market research, media
or film or advertising, power
and telecom
► Training Institute
Training institute set up by the Central
or state government or a local
authority or a training institute
affiliated to National Council for
Vocational Training (NCVT) or State
Council for Vocational training (SCVT)
► CBDT to notify the project, in
consultation with the National
Skill Development Agency
(NSDA) for three years (subject
to further extension)
► Skill development for existing
employees, i.e., not eligible for
employees within six months of
recruitment
► Company to maintain separate
books of accounts for the notified
project and
get them audited
Industry-specific
incentives
a
Infrastructure and power
b
Oil and gas
c
Hospitality and tourism
d
Electronics
Specified businesses
Deduction for capital expenditure
►
►
►
Deduction for capital expenditure (excluding land, goodwill, financial
instrument) incurred wholly for specified business
Covered expenditure: capital expenditure prior to the commencement of
operations and capital expenditure capitalized as on the date of
commencement of operations
Asset in respect of which a deduction is claimed and allowed shall be used
only for the specified business for a period of eight years
Quantum of Deduction
►
150% deduction of capital expenditure on:
►
Cold-chain facility and warehouse facility for the storage of agricultural
produce
►
Building and operating a hospital (specified parameters)
►
Developing and building a housing project (affordable housing – under
specified scheme)
►
Production of fertilizers in India
►
100% deduction of capital expenditure on:
►
Building and operating a hotel (of two-star and above category)
►
Developing and building a housing project (slum re-development)
►
Setting up and operating an inland container depot or a container freight
station (w.e.f 1 April 2013)
►
Bee-keeping/production of honey and beeswax (w.e.f 1 April 2013)
►
Setting up and operating a warehouse facility for storing sugar (w.e.f 1
April 2013)
►
Laying and operating a slurry pipeline for the transportation of iron ore
(w.e.f 1 April 2014)
►
Setting up and operating a semi-conductor wafer fabrication
manufacturing unit (w.e.f 1 April 2014)
Infrastructure and power
►
►
Deduction equivalent to 100% of profits for
10 consecutive years out of 15 years (20
years for specified infrastructure facilities)
(subject to other conditions)
Book profits subject to MAT; however, MAT
credit available for 10 years
Infrastructure development
►
►
Available only to an Indian company
(or its consortium) engaged in
the development or
operation and maintenance of infrastructure
facilities and has an agreement with
Central/state government, etc
Infrastructure facility inter-alia meaning a toll
road, a bridge, rail system, highway
projects, water supply projects, water
treatment system, sanitation and sewerage
system, etc
Power generation/distribution
► Available to an undertaking that:
► Begins the generation of power between April
►
Deduction
under
section 80IA
1993 and March 2017
Starts the transmission or distribution of power
between April 1999 and March 2017
►
Also available for undertaking substantial
renovation and modernization of the existing
network of transmission and distribution
lines between April 2004 and March 2017
(substantial renovation being specifically
defined)
Can be explored for captive power plants
Infrastructure and power
Service tax exemptions on —
►
Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair,
maintenance, renovation or alteration of:
►
►
►
►
►
A road, bridge, tunnel or terminal for road transportation for use by general public
A civil structure or any other original work pertaining to a scheme under the Jawaharlal Nehru National Urban Renewal
Mission or Rajiv Awaas Yojana
A building owned by an entity registered as a charitable institution and meant predominantly for religious use by the general
public
A pollution control or effluent treatment plant, except when located within a factory
Services by way of construction, erection, commissioning, installation of original work pertaining to:
►
►
►
►
►
An airport, port, railway, including monorail or metro
A single residential unit that is not part of a residential complex
Low-cost house with carpet area of 60 square meters per house in a housing project approved by competent authorities
empowered under the Scheme of Affordable Housing in Partnership and framed by the Ministry of Housing and Urban
Poverty Alleviation, Government of India
Post harvest storage infrastructure for agricultural produce, including cold storages for such purposes
Mechanized food grain handling system and machinery for equipment of units processing agricultural produce as food stuff,
excluding alcoholic beverages
Infrastructure and power
Service tax exemptions on —
►
Services provided to the Government, a local authority or a governmental authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of:
►
►
►
►
►
►
A civil structure or any other original work meant predominantly for use, other than for commerce, industry or any other
business or profession
A historical monument, archeological site or remains of national importance, archeological excavation or antiquity
A structure meant predominantly for use as (i) an educational, (ii) a clinical or (iii) an art or cultural establishment
Canal dam or any other irrigational work
Pipeline, conduit or plant for (i) water supply, (ii) water treatment, or (iii) sewerage treatment or disposal
A residential complex predominantly meant for self use or use of employees or other persons specified by the Act
Oil and gas
Deduction of 100% of profits for seven consecutive years on:
►
►
►
►
An undertaking located in any part of India that begins commercial production of mineral oil on or
after 1 April 1977 (provided that blocks are licensed under NELP before 1 April 2011)
An undertaking engaged in the refining of mineral oil and begins refining on or after 1 October
1998 but before 31 March 2012
An undertaking engaged in the commercial production of natural gas in blocks licensed under the
NELP – VIII round that begins production on or after 1 April 2009
An undertaking engaged in the commercial production of natural gas in blocks licensed under the
IV round of bidding for coal bed methane blocks that begin production on or after 1 April 2009
Specific mechanism available for computing profit of any business engaged in the extraction
and production of mineral oil under an approved production sharing contract that includes
100% capital expenditure
Hospitality and tourism
►
States such as Maharashtra, Madhya Pradesh, Rajasthan and Andhra Pradesh offer incentive
packages for hospitality and tourism sector projects
►
State-level incentives for such new or significant expansion projects may include:
►
►
►
►
►
►
►
Partial/Full exemption from luxury tax
Refund or exemption from VAT
Partial/Full exemption from entertainment/amusement tax
Concessions on electricity tariff/duties
Partial/Full exemption from stamp duty
Administrative reliefs in areas such as the renewal of licenses
Benefits defined by the size of eligible investment, location and employment generation
Incentives vary across states, depending on respective policies
Electronics
Background and objective:
►
The Department of Electronics and Information Technology (DEITY) has notified two schemes under the National Policy on Electronics
(NPE) 2012:
►
►
►
►
Modified-Special Incentive Package Scheme (M-SIPS)
Electronics Manufacturing Cluster Scheme (EMC)
Objective – To transform India into a global hub for Electronic System Design and Manufacturing (ESDM) and to expand the manufacturing
base of electronic products in India
Key goals for 2020 – to attract investment of INR 6,000 billion, enhance exports to INR 4,800 billion, achieve turnover of INR 24,000 billion
Eligibility:
►
M-SIPS – Companies engaged in electronic manufacturing, including telecom, electronics, automotive electronics, consumer electronics
players, looking to:
►
►
►
Investment in ESDM units being set up within notified areas (EMC)
Expansion of existing ESDM units set up within notified areas (EMC)
EMC scheme – Developers looking to set up/ upgrade cluster/ area in any part of the country
►
►
Greenfield EMC – for setting up EMCs in the notified areas
Brownfield EMC – for upgrading existing EMCs in the notified areas
M-SIPS
►
►
►
►
►
►
Capex Subsidy - 25% in non-SEZ/20% in SEZ
Reimbursement of CVD/excise on capital
equipment for non-SEZ units
Reimbursement of central taxes and duties for 10 years
in select high-tech units such as fabs, semiconductor
logic and memory chips, LCD fabrication
Subsidy/Incentive will be released after the end of the
financial year in which the investment exceeds the
minimum prescribed threshold
Incentives available for 10 years from the date of
approval of the project by DEITY
State government incentives provided in addition to the
mentioned incentives
Fiscal
incentives
under NPE
2012
EMC
►
►
►
►
►
►
►
►
Financial assistance to SPV in the form of grant-in-aid and
not as equity
Greenfield EMC – grant-in-aid of 50% of project cost
(subject to INR50 crore for 100 acres land)
Brownfield EMC – Grant-in-aid of 75% of project cost
subject to INR50 crore
Disbursement mechanism:
First installment: 20% of grant-in-aid released in advance of
the post final approval
Second installment: 30% of grant-in-aid after the utilization
of 80% of the first installment
Third installment: 30% of grant-in-aid the after utilization of
80% of the second installment
Final installment: 20% of grant-in-aid after successful
completion of the project
Electronics
Applicability of benefits – prescribed conditions
M-SIPS
►
►
►
►
Financial incentive/subsidy for investments in
ESDM units such as:
► New ESDM units
► Expansion of existing ESDM units – Increase in
capital investment in P&M of at least 25%
For ESDM units set up within notified electronic
manufacturing clusters
Investments in eligible 29 verticals/categories of
ESDM products, including:
► Electronics products, including nano-electronics
products and telecom products
► Intermediate goods, including semiconductor
chip
► electronics manufacturing services
(Refer Annexure 2 for the list of verticals)
Open for three years from the date of notification in
the official Gazette of India, i.e., until 26 July 2015
EMC
►
►
►
►
►
►
►
►
Financial assistance for setting up EMC:
► Greenfield EMC (new)
► Brownfield EMC (upgrading existing clusters)
Investment in eligible activities within EMC such as
basic development, essential services, welfare
services, support services, manufacturing support,
government regulatory support/services (refer
Annexure 3 for details)
At least 80% of the land to be allotted to the
processing area in Greenfield EMC
75% investment in EMC to be from constituted
ESDM units
Minimum committed investment by ESDM units to
be four times of the financial assistance sought for
Minimum industrial contribution (i.e., from ESDM
units within EMC) to project cost:
► 25% for greenfield
► 15% for brownfield
Available for investments in ESDM units across all
stages of value chain, including design,
manufacturing, testing and packaging
Open for applications for five years from the date of
notification, i.e., 22 October 2012
Approval process for obtaining fiscal benefits under both the schemes provided in Annexure 4
51 brownfield investment clusters have been notified by the DEITY (Refer Annexure 4)
Our value
proposition
Our value
proposition
Review/Evaluate
►
►
►
Existing tax positions - incentives
availed, deductions claimed
Issues in tax litigation
Proposed expansion, if any
Identify/Explore
►
►
►
►
Scheme of incentives/concessions available
Approval process, if any
Undertaking a simulation study to determine benefits
Discussion with management to decide on the
implementation of the most favorable
incentive/concession
Implementation
►
Approval, if required, in:
►
►
►
►
►
Assistance in strategizing for approval application
Negotiation/Liaison with government officials to obtain approval
Tax health-check to re-align items/tax positions, where required
Quantitative services (QS) for systematic tax planning
Implementing the incentive/concession scheme, as decided by management
Introduction to Quantitative services (QS)
►
What is QS?
►
►
►
►
Domestic tax planning using current and historic information
A formalized and systematic approach for analyzing large data sets
Flexible for various accounting systems and jurisdictions
A methodology that can be applied globally
►
Why relevant now?
In carrying out retrospective reviews of expenditure, we do not
underestimate the need to consider the tax authority response to
retrospective changes to tax returns. As a result, we involve
members of our Controversy team, who are typically ex-tax authority
inspectors
Once a retrospective review has been performed, the results will
often lead to proactive system recommendations to improve data
capture or identify planning opportunities to reduce the impact of
non-deductible costs
We are hearing from the market:
►
►
►
►
►
►
“We need cash”
“We need to do more with less”
“We need assurance that our estimated disallowable is accurate”
“Reliefs keep changing and we can’t keep up”
“100% accuracy takes up too much time of my limited resources”
“The tax authorities want more detail”
Typical benefits of a QS review
►
►
The typical benefits arising from a QS review depend on the precise
area under review. E.g., when we examine disallowable
expenditure, we have generated tax benefits from our review of up
to 10% of the expenditure under review
As penalty regimes become more onerous across the world, a QS
review provides assurance that the content of tax returns is accurate
Our QS practice approach
►
►
►
Our QS practice applies a working capital approach to tax. We
identify regions where the group is paying cash tax, or where tax
losses may be due to expiry
We then undertake a top-down review of the financial statements
and tax returns to enable us to get feedback on an initial high-level
feasibility output for identifying areas that could benefit from a
detailed review
The next stage is a detailed feasibility on the areas identified,
where we would review a the relevant data and analyze specific
accounts in detail
Data in multiple
forms and from
multiple sources
Tax incentives in India
Specialist tax
technical skills –
complex legislation,
often supported by
case law
Cash tax
opportunities
Assurance over
reporting
Annexures
Annexure 1
Schedule Eleven: list of articles or things
►
►
►
►
►
Beer, wine and other alcoholic spirits
Tobacco and tobacco preparations, such as, cigars and cheroots, cigarettes, biris,
smoking mixtures for pipes and cigarettes, chewing tobacco and snuff
Cosmetics and toilet preparations
Tooth paste, dental cream, tooth powder and soap
Aerated waters in the manufacture of which blended flavoring concentrates in any
form are used
Explanation —“Blended flavouring concentrates” shall include, and shall be deemed
always to have included, synthetic essences in any form
►
►
►
►
►
Confectionery and chocolates
Gramophones, including record players and gramophone records
Projectors
Photographic apparatus and goods
Office machines and apparatus such as typewriters, calculating machines, cash
registering machines, cheque writing machines, intercom machines and teleprinters
Explanation —The expression “office machines and apparatus” includes all machines
and apparatus used in offices, shops, factories, workshops, educational institutions,
railway stations, hotels and restaurants for office work and for data processing (not
being computers within the meaning of section 32AB of the Act)
►
►
►
►
►
Steel furniture, whether made partly or wholly of steel
Safes, strong boxes, cash and deed boxes, and strong room doors
Latex foam sponge and polyurethane foam
Crown corks, or other fittings of cork, rubber, polyethylene or any other material
Pilfer-proof caps for packaging or other fittings of cork, rubber, polyethylene or any
other material
Annexure 2
List of verticals
A. Electronics products including nano-electronics products and
telecom products such as:
►
►
►
►
►
►
►
►
►
►
►
►
►
►
►
►
►
►
Telecom products
IT Hardware products
Consumer electronics including televisions, digital cameras and
camcorders
Health and medical electronics
Strategic electronics
Solar photo voltaic including thin film and polysilicon
Light Emitting Diodes (LEDs)
Liquid Crystal Displays (LCDs)
Avionics
Industrial electronic products, including measuring and control equipment,
and energy meters
Nano-electronic products
E-waste processing/recycling
Automotive electronics such as anti-lock braking system, electronic brake
distribution and traction control
Agri-electronics
Energy conservation electronics
Opto-electronics
Bio-metric and identity devices/RFID
Power supplies for ESDM products
Annexure 2
List of verticals
B. Intermediate goods, including:
►
►
►
►
►
►
►
►
►
►
►
Nano-electronic components
Semiconductor wafering
Semiconductor chips including logic, memory and analog
All assembly, testing, marking and packaging of ESDM units
Chip components
Discrete Semiconductors such as transistors and diodes
Power semiconductors (including diffusion) such as FETs, MOSFETs,
SCRs, GTDs and IGBT
Electromechanical components and mechanical parts such as multilayer
PCBs, transformers, coils, connectors, switches, ferrites, micro motors,
stepper motors and films
Consumables and accessories such as mobile phones and IT accessories
– batteries, chargers, PCBs, foils, tapes, epoxy, cabinets, etc
All Fabrication Manufacturing facilities (Fabs) for ESDM products
Any intermediates not covered above shall be decided and permitted under
the scheme by the Competent Authority
C. Electronics manufacturing services, including:
►
Units providing services for the manufacture of sub-assemblies and parts,
including integration services, to OEMs
Annexure 3
Eligible activities
Basic development:
► Boundary walls
► Internal roads
► Street light
► Storm water drains
Essential services:
► Government support office
► Water treatment plant
► Sewage lines/treatment
► Water disposal/recycling/water
harvesting
► Electricity substation/distribution
► Backup power plant
► Warehousing
Manufacturing support:
► Tool room
► CAD/CAM design house
► Plastic molding
► Sheet metal stamping
► Packing/epoxy supplier
► Testing and certification facility
► Component testing
Support services:
► Centre of Excellence (R&D)
► Training, auditorium and
conference facility
► Video conferencing
► IT infrastructure/telecom
Welfare services:
► Employee hostel and mess
► Hospital and ESIC
► Recreational facility playground
clubhouse
► Crèche/Nursery
► Local shopping center
► Restaurants
► Educational facilities
Government regulatory support
services:
► Development
Commissioner/designated officer
► Tax support/filing
► Factory/ Labor compliance
support
► Pollution control
Annexure 3
Approval process
M-SIPS approval process:
► An applicant may be legal
entity/consortium of legal entities
registered in India
► The proposed project may include
one or more electronic products;
however, the applicable threshold
would be the sum of the thresholds
required to manufacture each of the
products separately
► An initial application may be made
for both new units and for the
expansion of existing ones
► The proposed project may include
multiple manufacturing facilities at
one or more locations
► Financial closure is to be submitted
for the proposed project:
► Single phase implementation
for the complete project
► Multi phase for at least the first
phase of the project
► Non-refundable application fee
(ranges from INR10,000 to
INR1 lakh)
EMC scheme approval process:
► The applicant may be:
► Individual
► Company
► Society
► Industrial association
► Financial Institutions
► R&D institutions
► State or local government or
their agencies
► Units within EMC
► Others
► Two-stage application process:
► Preliminary application,
followed by in-principle
approval
► Final application within six
months of in-principle approval
► Application to be in prescribed
format, including details on
applicant, EMC/land, SPV,
financial closure and means of
finance
► Prescribed application fee to
be paid
Annexure 4
Sr.
No.
Brownfield Electronics
Manufacturing Cluster for
MSIPS, Scheme
Sr.
No.
Brownfield Electronics
Manufacturing Cluster for
MSIPS, Scheme
Sr.
No.
Brownfield Electronics
Manufacturing Cluster for
MSIPS, Scheme
1
Districts of Hyderabad
18
Districts of Bengaluru
35
District Jaipur
2
Districts of Nellore & Chitoor,
19
Mysore, District
36
Ajmer
3
Vishakhapatnam, District
20
District Thiruvananthapuram
37
Bhiwadi
4
Krishna, District
21
District Alappuzha,
38
Neemrana block
5
Ahmadabad-District
22
Kannur- District
39
Kota District
6
Gandhi Nagar-District
23
Districts of Dewas, Indore, & Dhar
40
Udaipur District
7
Vadodara, District
24
Bhopal, District
41
Kancheepuram District
8
District Gurgoan
25
Raisen, District
42
Haridawar district
9
Bawal, Tehsil
26
District Pune
43
Udham Singh Nagar
10
Dharuhera, Sub Tehsil
27
Mumbai
44
Noida
11
Block Kandaghat
28
Navi Mumbai
45
Ghaziabad, District
12
Block & Urban body area, Solan
29
Nagpur District
46
Kolkata, District
13
Block, Dharampur
30
Nasik, District
47
Haldia, District
14
Block, Nalagarh
31
Aurangabad, District
48
Kharagpur
15
Urban body area Nalagarh
32
Thane, District
49
Durgapur
16
Urban body area Baddi
33
Union Territory of Puducherry
50
Siliguri
17
Urban body area Parwanoo
34
Mohali
51
Howrah, District
Glossary
Glossary
AA
Advance Authorization
FDI
Foreign Direct Investment
Act
Income-tax Act, 1961
FMS
Focus Market Scheme
CBDT
Central Board of Direct Taxes
FPS
Focus Product Scheme
CST
Central Sales Tax
MAT
Minimum Alternate Tax
DDT
Dividend Distribution Tax
M-SIPS
Modified Special Incentive Package Scheme
DFIA
Duty Free Import Authorization
NELP
New Exploration Licensing Policy
DEITY
Department of Electronics and Information Technology
NPE
National Policy on Electronics
DSIR
Department of Scientific &Industrial Research
PF
Provident Fund
DTA
Domestic Tariff Area
QS
Quantitative Services
EOU
Export oriented Unit
R&D
Research and Development
EPCG
Export promotion Capital Goods
SEZ
Specified Economic Zone
EMC
Electronic Manufacturing Cluster
SFIS
Served From India Scheme
ESDM
Electronic System Design and Manufacturing
VAT
Value Added Tax
ESI
Employee State Insurance
WDV
Written Down Value
Ernst & Young LLP
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